Inflation, weak demand and falling employment weigh on the eurozone

The euro area economy, also known as the eurozone, declined for a sixth consecutive month in November, according to recent data, marking a continued contraction through the midpoint of the fourth quarter.

The HCOB Eurozone Composite PMI Output Index, a combined measure of manufacturing and services sectors, persisted below the 50.0 threshold for November, indicating a continual reduction in private sector output levels across the eurozone.

November’s PMI came in at 47.6 and showcased a slight improvement from October’s low of 46.5 for the first time in 35 months. However, despite this marginal uptick, it remains a significant signal of economic decline within the region.

“The service sector maintained its downward slide in November. The modest improvement of the activity index does not leave much room for optimism regarding a swift recovery in the immediate future,” Dr. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said.

Ongoing economic challenges in the eurozone

Several key indicators have highlighted the ongoing economic challenges. Employment declined for the first time since January 2021, demonstrating the impact of weakening demand conditions on the labour market. This decline primarily affected manufacturing, while staffing in the service sector continued to expand.

Major eurozone economies witnessed a contraction in business activity with France, closely followed by Germany and Italy, experiencing declines. Moreover, Spain’s private sector shrank for the first time since August. Only Ireland saw an expansion in output among eurozone regions.

Persistent weak demand has forced companies to delve further into their backlogs, resulting in a pronounced decline in outstanding orders for an eighth consecutive month.

The economic landscape was also impacted by intensifying inflationary pressures with input prices rising sharply, particularly in the service sector, while manufacturers experienced a decrease in expenses.

The HCOB Eurozone Services PMI Business Activity Index, came in at 48.7 for November, continuing to signal a decline in the service sector’s activity, persisting below the growth threshold.